Baltic Rim Economies - Baltic Port List

Expert article 857 Baltic Rim Economies, 21.12.2011 Quarterly Review 5�2011
Challanges for the EU from the perspective of external audit and accountability
By Olavi Ala-Nissilä
The European Court of Auditors (ECA) - or simply the Court -
is the independent audit institution of the European Union. The
Lisbon Treaty, which entered into force two years ago,
confirmed ECA’s position as one of the seven Institutions of
the European Union. The Court is based in Luxembourg and
has a staff around 900 professionals from all EU nationalities.
Since its creation in 1977, the Court has focused its attention
on the importance of EU financial management. The Court’s
mission is to act as an independent guardian of the financial
interests of the citizens of the Union. It is a mighty challenge
and requires constant alertness especially in these
economically difficult times.
The Court’s principal tasks are to carry out financial and
compliance audits, principally in the form of the statement of
assurance (or DAS); and performance audits of topics selected
to maximise the impact of its work. In addition, ECA produces
opinions on proposed regulations related to budgetary
management and other issues of importance. During the past
three years the Court has – on its own initiative – tackled also
some other important issues, like EU budget reform and
economic and financial crisis, in the form of position papers,
reflections and contributions.
The annual report on the implementation of the EU budget
is ECA’s main product. The report mainly comprises the DAS
opinion on the EU budget as a whole and specific
assessments of various policy groups, and is published each
year in November. The latest annual report – 34th overall –
was published on 10 November 2011 covering the financial
year 2010. The payments made from the EU budget in 2010
were EUR 122,2 billion.
The ECA’s statement of assurance – déclaration
d’assurance (DAS) – is based on objective evidence obtained
in particular from audit testing in accordance with international
audit standards. The statement includes two parts: reliability of
the accounts and regularity of transactions (there are three
types of transactions: revenue, commitments and payments).
In its latest annual report, concerning the financial year
2010, the Court found that the accounts present fairly the
financial position of the European Union and the results of its
operations and its cash flows for the year. However, the
payments underlying these accounts were affected by material
error, with an estimated error rate of 3,7 % for the EU budget
as a whole.
The Court’s estimated error rate for spending in Cohesion,
energy and transport policy group (the most error prone EU
spending area) was higher than for 2009, with an estimated
error rate of 7,7 %. For the other areas of EU spending the
estimated error rate remained relatively stable. This applies
also to the biggest area of EU budget expenditure, agriculture
and natural resources, where the estimated error rate was 2,3
%. However, the estimated error rate for the main part of that
policy area, i.e. direct payments covered by the Integrated
Administrative Control System (IACS), was below materiality
level of 2 %.
In relation to performance audits, the Court’s objective is to
produce annually 12-15 special reports on the various themes.
When selecting topics the Court considers i.a. the risks to
performance for the particular area of expenditure, the level of
spending involved, the time elapsed since any previous audits
and political/public interest. In the performance audits the
Court assesses the economy, efficiency and effectiveness of
the selected areas. If there were one common theme on the
various performance audits carried out by the Court in previous
year, it would have to do with the importance of the planning
phase. In particular, the Court concluded that when planning
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and implementing EU spending programmes, the Commission
and the Member States should pay greater attention to
defining objectives that are specific, measurable, achievable,
relevant and timed - as well as to identifying and mitigating the
risks to implementation.
On the basis of the Court’s audit findings and despite
many years of incremental improvements in systems, there
remain significant risks to the regularity of payments that can
only be fully addressed by reforming legislative frameworks
and re-designing control systems. The proposals for sectoral
legislation governing spending after 2014 and for new financial
regulation provide an opportunity to do that. The Commission,
the European Parliament and the Member States have now
real golden opportunity to improve the financial management
of the Union.
In past few years there have been a number of significant
developments in EU economic governance which raise
important issues of transparency and increase the risk of gaps
in accountability and public audit developing. Those
developments in mind, the Court published in May 2011 a
position paper on consequences for public accountability and
public audit in the EU and the role of ECA in the light of current
financial and economic crisis. The Court identified cases where
public audit arrangements are not adequate. More specifically,
the Court considered that the Treaty establishing the European
Stability Mechanism should include provisions for public
external audit. The general message of the position paper was
that where public funds are at stake there should be adequate
arrangements for transparency, public accountability and
public audit. Similar concerns for adequate public
accountability and public audit were highlighted in the
statement and resolutions of the Contact Committee of the
Heads of the EU Supreme Audit Institutions in October 2011.
Promoting transparency and accountability is a
responsibility all institutions share in democratic societies. It is
even more crucial in the current context where the pressure on
public finances is high, the importance of the EU meeting its
objectives is great, and the need to build the confidence and
trust of citizens in the European Union and its institutions is
acute.
Many prominent economists have called this crisis the
worst since the Great Depression of 1930s. We are definitively
now in a global crisis. In Europe, the impact has been felt, not
only around Mediterranean Sea, but also around Baltic Sea.
Drastic savings measures have been taken to regain the
confidence. The results have been more positive around the
Baltic Sea. However, the decisive factor at the end of the day
will be the competitiveness and ability to grow and perform in
sustainable way in ever tougher global competition. The crisis
provides always opportunities. This crisis is too expensive to
be wasted.
I invite all the readers to look for more information on the
Court’s our role and work in our website www.eca.europa.eu
Olavi Ala-Nissilä
Member of the European Court
of Auditors, Dean
European Court of Auditors
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